APA Q3 Earnings Miss Even as Callon Buyout Drives Production

U.S. energy operator APA Corporation APA reported third-quarter 2024 adjusted earnings of $1 per share, missing the Zacks Consensus Estimate of $1.03 and deteriorating from the year-ago adjusted figure of $1.33. The underperformance primarily reflects lower commodity prices and higher costs.

Revenues of $2.5 billion were up 10% from the year-ago quarter’s sales and came ahead of the Zacks Consensus Estimate by 11.7% on the back of contribution from the Callon Petroleum acquisition and higher-than-expected production.

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Meanwhile, APA continues to reward shareholders with dividends and buybacks. APA bought back 102,305 shares at $29.32 apiece during the third quarter. The company also shelled out $92 million in dividend payments.

APA Corporation Price, Consensus and EPS Surprise

APA Corporation price-consensus-eps-surprise-chart | APA Corporation Quote

Production & Selling Prices

Production of oil and natural gas averaged 467,480 BOE/d, which comprises 72% liquids. The figure was up 13.4% from the year-ago quarter and surpassed our expectation of 450,458 BOE/d.

U.S. output (accounting for 64% of the total) jumped 33.3% year over year to 300,709 BOE/d but production from the company’s international operations decreased 10.6% to 166,771 BOE/d. APA’s oil and natural gas liquids (NGLs) production was 336,323 barrels per day (Bbl/d). Natural gas output totaled 786,944 thousand cubic feet per day (Mcf/d).

The average realized crude oil price during the third quarter was $78.06 per barrel, down 9.4% from the year-ago realization of $86.15. However, the number came above our projection of $73.90. Meanwhile, the average realized natural gas price fell to $1.43 per thousand cubic feet (Mcf) from $3.12 in the year-ago period and missed our estimate of $1.80.

Costs & Financial Position

APA’s third-quarter lease operating expenses totaled $418 million, up 6.1% from $394 million in the year-ago period. Moreover, a significant increase in the cost of oil/gas equipment, higher depreciation outgo and an asset impairment charge meant that total operating expenses almost doubled from the corresponding period of 2023 to $2.9 billion. Our model put the figure at $1.7 billion.

During the quarter under review, APA generated $1.3 billion of cash from operating activities while it incurred $698 million in upstream capital expenditures. The Zacks Rank #3 (Hold) company reported an adjusted operating cash flow of $1.1 billion. It also registered a free cash flow of $219 million compared to $307 million a year ago.

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As of Sept. 30, APA had approximately $64 million in cash and cash equivalents and $6.4 billion in long-term debt, representing a debt-to-capitalization of 50.8%.

Guidance

APA expects adjusted production to average 415,000 BOE/d in Q4 and 384000 BOE/d in 2024. Of this, oil volumes are likely to be 218,000 Bbl/d during the October-December period and 198,000 Bbl/d for the full year. The company pegged its upstream capital expenditure for the year at $2.75 billion.

Some Key E&P Earnings

While we have discussed APA’s third-quarter results in detail, let’s see how some other upstream companies have fared this earnings season.

ConocoPhillips COP, one of the world’s largest independent oil and gas producers, reported third-quarter 2024 adjusted earnings per share of $1.78, which beat the Zacks Consensus Estimate of $1.68. The outperformance can be attributed to higher oil equivalent production volumes and decreased total costs and expenses.

As of Sept. 30, 2024, ConocoPhillips had $5.2 billion in cash and cash equivalents. The company had a total long-term debt of $16.99 billion and a short-term debt of $1.3 billion as of the same date. Capital expenditure and investments totaled $2.92 billion. Net cash provided by operating activities was $5.8 billion.

Another U.S. energy operator Diamondback Energy FANG reported third-quarter 2024 adjusted earnings per share of $3.38, which missed the Zacks Consensus Estimate of $3.80 and decreased from the year-ago adjusted figure of $5.49. The underperformance primarily reflects a fall in overall realization. However, revenues of $2.6 billion rose 13% from the year-ago quarter’s sales and outperformed the Zacks Consensus Estimate by 6.6% on strong production.

Diamondback capital expenditure was $688 million. Of this, $633 million was spent on drilling and completion, $52 million on infrastructure, environment and $3 million on midstream. The company booked $1 billion in free cash flow in the third quarter. As of Sept. 30, the Permian-focused operator had approximately $373 million in cash and cash equivalents and $11.9 billion in long-term debt, representing a debt-to-capitalization of 25%.

Natural gas producer EQT Corporation EQT reported earnings from continuing operations of 12 cents per share, which beat the Zacks Consensus Estimate of 5 cents. The better-than-expected quarterly earnings were driven by higher gas equivalent sales volume, offset partially by lower oil price realizations.

EQT’s sales volume increased to 581.4 billion cubic feet equivalent (Bcfe) from the year-ago quarter’s level of 522.7 Bcfe. The reported figure also beat our estimate of 552.7 Bcfe. Natural gas sales volume was 547.2 Bcf, up from 491.5 Bcf in the year-ago quarter. The figure also beat our estimate of 521.6 Bcf.

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